Shedding Light on Political Corruption in Indonesia's Coal Mining Sector
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Shedding Light on Political Corruption in Indonesia’s Coal Mining Sector
Table of Contents
2 Table of Figures
Table of Boxes
Table of Tables
Chapter 1
5 Introduction – Filling in the Gap
1.1 Background
9 1.2 Report Objectives
Chapter 2
11 The Frame – Dissecting Corruption in the Mining Sector
2.1 Corruption in state-society relations
13 2.2 Assessing corruption risk in Indonesia
Chapter 3
15 Corruption in Coal Mining – The Game of Political Exposed Persons
3.1 The game
20 3.2 The chummy coal sector and influx of PEPs
Chapter 4
23 Toba Sejahtra – A General in the midst of East Kalimantan’s Political Corruption
4.1 East Kalimantan political corruption map: new landscape, old structure
28 4.2 Toba Sejahtra – business, politics, and conflict of interest
37 4.2.1 Abandoned open mining pits and water pollution in mining sites
40 4.2.2 Multiple cases of land disputes
Chapter 5
45 Conclusion – Ending Business as Usual
47 Bibliography
Table of Figures
13 Figure 1. Extractive industry/mining value chain
29 Figure 2. Map of Toba Sejahtra business group
34 Figure 3. Map of PEPs in Toba Sejahtra coal-mining business
Table of Boxes
19 Box 1. The business of politics in Indonesia
22 Box 2. Some PEPs behind the coal
31 Box 3. All the Luhut’s men
32 Box 4. TOBA and their power plant business expansion
36 Box 5. Rakabu Sejahtra – Who is in the Driver’s Seat?
41 Box 6. The Curious Case of Kimco Armindo
42 Box 7. Local Farmers against PKU 1
44 Box 8. TOBA and the Offshore Leaks connection
Table of Tables
37 Table 1. Heavy metal contamination on water in Kutai Energi void and Nangka river
2
Coalruption – Shedding Light on Political
Corruption in Indonesia’s Coal Mining Sector
Executive Summary
Coal: the “cash cow” for political campaigns Individuals hold powerful political positions despite a
serious conflict of interest. The Coordinating Minister
Since its rapid expansion in the early years of this of Maritime Affairs, Luhut Binsar Pandjaitan, who
century, Indonesia’s coal sector has become a main has oversight of the mining and energy sector, is a
source of funds for political campaigning, both at the shareholder in a holding company, PT Toba Sejahtra,
national and regional or local levels. Individuals with which has a number of subsidiaries involved in coal
business interests in the coal industry are playing mining and coal-fired power plants. Other politically-
important roles in the 2019 presidential election, in exposed persons (PEPs) are connected with these
the campaigns of both Joko Widodo-Ma’ruf Amin and businesses, including members of Luhut’s family,
Prabowo Subianto-Sandiaga Uno. Candidates and their former ministers and retired generals.
campaign teams are deeply connected with the coal
sector. Business opportunities in the coal sector in Indonesia
come not only from the country’s extensive coal
At the regional and local level, decentralisation has reserves and foreign markets; the sector is generously
led to more elections and more political campaigns subsidised, so the corruption involves public money
which are expensive for candidates as state subsidies too. Researchers have identified 15 subsidies in
are limited. Money from coal mining operations has Indonesia’s coal industry from direct or indirect
filled the gap, and become a key source of finance transfer of liabilities to price support. Half of those
for election candidates. Indonesia’s anti-corruption subsidies were worth nearly US $1 billion in 2014.
agency, KPK, and civil society groups have reported a
sharp increase in the number of mining licenses issued How decentralisation has fuelled corruption
during an election campaign or right after an election.
Prior to 1999, mining regulations and permits were run
Coal and political corruption by a centralised administration. Since then, Indonesian
government has been decentralised which, while
The coal sector is plagued with commercial corruption, ostensibly good for democracy, has led to even greater
blackmail and thuggery. But the corruption goes corruption. Politicians at regional and local level have
beyond this. The requirement for large capital been given greater powers over resources in their
expenditure, government regulation, royalty and tax area, expanding the number of people able to benefit
takes and the dependence on state-run or state-owned from corrupt practices. Decision-making processes
infrastructure to bring the coal to market exposes the have grown more political and local officials have more
sector to political corruption too. discretionary powers to issue permits for mining in
exchange for “compensation”.
Mining companies and their agents have to deal
with government officials, which fuels “chumminess” This is led to an explosion in the number of mining
among corporations, bureaucrats and politicians. permits issued, up from 750 in 2001 to more than
Political elites also merge business and politics. All 10,000 in 2010, a 13-fold increase, nearly half of which
are implicated in political corruption. Insufficient were for coal mining.
segregation of roles and responsibilities has led
to further corruption because there is no proper
independent oversight of the industry.
3
This proliferation, coupled with the high profitability How coalruption is destroying Indonesia
of coal and huge public subsidies, has attracted
hundreds of politicians or business people with Indonesia has become “the dirty man of Asia” because
political connections (politically exposed persons) into of its addiction to coal, which is actively promoted
the industry, further fuelling corruption. On several by politically exposed persons for their own financial
occasions, overseas companies have sold their stake gain. Government plans to reduce coal production in
in mining operators to Indonesian businesses with recent years have been over-turned. Instead of falling
political connections. National and local elites have to 413 million tonnes in 2017, as originally planned,
used their political power to further their personal production actually rose to 477 million tonnes.
interests.
Coalruption is destroying the well-being of Indonesia.
East Kalimantan: the visible evidence of coalruption It is contaminating the land of East Kalimantan,
in Indonesia sometimes with deadly effects; it is eroding Indonesia’s
reputation as a place to invest; and it is undermining
East Kalimantan is the heartland of Indonesia’s coal Indonesian democracy by drawing in businesses,
industry, and is pockmarked with abandoned coal bureaucrats and politicians at all levels of government.
mines. Under Indonesian law, these pits should be The political and financial health of Indonesia requires
restored and replanted once they are no longer in an end to this corruption but also to the dependence
use. But they are not. Companies routinely flout these on coal which is feeding it.
regulations, acting with impunity because of deep
rooted corruption in the industry. Recommendations for action
This corruption allows companies to escape their Several steps are needed to address political
responsibilities, not only failing to restore abandoned corruption in the coal mining sector:
pits but failing even to produce guarantees, as required
by law, that they have the funds to do so. Of 856 • Stronger law enforcement over coal mining
commercial coal mining license holders registered at operations. The current weakness is closely
the East Kalimantan Office of Mining and Energy, only related to PEPs’ ownership and leadership of coal
96 had deposited the funds needed to restore the mine companies.
once operations ceased.
• Stronger legal measures to end conflict of interest
How a few key ‘politically exposed persons’ steer among PEPs, including stronger safeguards against
government policy the risk of collusion and political interference
caused by the “revolving door phenomenon”,
Indonesian law requires mining companies to disclose whereby individuals frequently switch between
the legal owners as registered with the Ministry of Law high-level positions in the public and private
and Human Rights. But the true, or beneficial, owners sectors
can be hidden from public scrutiny. So a market which
appears to be competitive, with multiple companies • Greater transparency over beneficial ownership in
involved, might in fact be controlled by only a few the coal mining business. When the true owners of
people, allowing them to act as a cartel by owning or business entities are hidden, it is impossible for the
controlling multiple companies under different legal public to know who controls companies.
names or business entities.
• A roadmap to phase out coal mining in Indonesia.
The corruption is entrenched. It involves not only Environmental damage impacting human health,
politically exposed persons, but the political party unsustainable development and social conflict
machine and the military. Tracking the names behind caused by coal mining is widespread. This
many of the businesses in the coal sector reveals a roadmap needs to set out a comprehensive energy
network of people, linked by family, politics or military transition from coal to clean and renewable
ties, all who benefit from the continued growth of the energy.
coal sector in mining and coal-fired power plants.
4
01. Introduction –
Filling in the Gap
“In the past, we relied on the Nangka River for farming, fishing, and
drinking water. After Kutai Energi’s mining operations, and the abandoned
voids, the water from the river has been muddy and polluted and cannot
be used for daily needs, even as a cattle drinking source.” (Rukka, Chair of
Maju Bersama Farmer Group, the Nangka River, Teluk Dalam Village, Muara Jawa, Kutai
Kartanegara District, East Kalimantan on the disposing of water from the voids directly
into the Nangka River without filtering or settling ponds by PT Kutai Energi)
1.1 Background
East Kalimantan is the heartland of Indonesia’s coal mining industry. Thousands
of open cast mines are scattered across the region, many of them illegal. Mines
continue to be opened while others are abandoned when the coal reserves are
exhausted. New mines often lead to the destruction of rain forest, and the way
working mines are operated leads to air and water pollution. The environmental
damage doesn’t end when the mines are exhausted as abandoned mines have
proved dangerous, even fatal, for local communities.
Under Indonesian law, mining companies are required to fill in pits that are no
longer in use, and to re-plant and restore mining sites. Each stage of the process
should be approved by a government agency as part of the initial application for
a mining license. Companies are also required to carry out environmental impact
assessments, and to submit financial guarantees for reclamation and restoration of
mining sites. However, companies routinely flout these regulations. This impunity
persists widely in coal mining sites across Indonesia, including in the coal-rich
province of East Kalimantan
How coal mine operators evade responsibility
In December 2015, the East Kalimantan Office of Mining and Energy listed 856
commercial coal mining license holders. Of these, only 338 had reclamation
guarantee funds in place.1 Only 96 of these 856 license holders had deposited
the post-mining guarantee funds needed to fully restore the mining site.2 Unlike
reclamation funds, these do not need to be deposited in advance, but must in place
two years before the permit expires.
1
Apriando, T. 2017. Who owns Indonesia’s deadly abandoned coalmines? Mongabay. 25th May 2017
https://news.mongabay.com/2017/05/who-owns-indonesias-deadly-abandoned-coal-mines/
2
Ibid
5
As a consequence, mining companies have failed to restore hundreds of
abandoned open-pit coalmines, which now scar the landscape of East Kalimantan
with deadly effects. The National Commission on Human Rights found those mine
01. pits left behind by 17 companies in East Kalimantan claimed the lives of 27 people
between 2011 and 2016, mostly children and teenagers.3 By December 2018,
the death toll from the mine pits already reached 31.4 East Kalimantan’s Office
of Mines and Energy said reports from 81 companies indicated there were 314
former mine pits (voids) in the province as of December 2016.5 However, a survey
conducted by the Office counted more than twice that number when using Landsat
images, identifying 632 coalmines transformed into giant puddles. 264 of these
voids (42%) were located in Kutai Kartanegara.6
So far, no mining company has been prosecuted for either the deaths or the failure
to restore the abandoned mine.
How corruption has led to impunity
The impunity which these mining companies enjoy is because of corruption in
the mining sector. The anti-corruption organisation Transparency International,
in its 2011 Bribe Payers Survey 7, identified oil and gas, and mining as the most
bribery-prone sectors. Mining’s high-value investment and the heavy involvement
of government through various regulations have provided opportunities and
incentives for corruption. The 2016 OECD Report on Corruption in the Extractive
Value Chain highlighted that corruption risks may arise at any point in the value
chain: from the decision to extract to the revenue-spending phase. The report
revealed that most of the corruption cases surveyed in the extractive industry are
in the “awarding of mining, oil and gas rights”, and “extraction operations and regulation”
phases (34 out of 59 cases), while the remaining cases are in the “revenue
collection” phase. The offenses include bribery of foreign officials, embezzlement,
3
Ibid
4
Yovanda. 2018. Korban di Lubang Tambang Batubara Terus Bertambah, Sampai Kapan? Mongabay. 8th
November 2018.
http://www.mongabay.co.id/2018/11/08/korban-di-lubang-tambang-batubara-terus-bertambah-sampai-
kapan/
5
Op.Cit. Apriando, T. 2017
6
Ibid
7
https://transparency-france.org/wp-content/uploads/2016/04/2011_BPI_EN.pdf
6
misappropriation and diversion of public funds, abuse of office, trading in
influence, favoritism, extortion, bribery of domestic officials, and facilitation
payments.
Indonesia’s mining sector, especially in the case of coal, is not immune to this.
Laode Muhamad Syarif, the Vice Chairman of Indonesia’s Corruption Eradication
Commission (KPK), has said the mining license issuance process at the local level is
plagued by bribery and kickbacks.
Corruption has driven a 13-fold increase in the number of Mining Business Permits
(IUP) since 2001, nearly half of them for coal.8 Decentralization of Indonesian
governance in 2001 has fuelled this corruption as leaders at regional and provincial
levels were given greater power over the resources in their area. For example,
illegal coal exports grew to 90 million tons, worth some US$ 5 billion (equal to
IDR 58 trillion), annually.9 Corruption has also meant many local license holders
are able to avoid paying relevant fees, taxes and royalties, including reclamation
insurance, post-mining insurance, surety indemnity, and environmental insurance.
How decentralization fuels corruption
Quick returns on investment, high profitability and huge subsidies have attracted
politically exposed persons (PEP)10 into the coal sector. The discretionary power
of regional governments has created opportunities for politicians to exploit their
position. The most significant development fuelling corruption in the mining sector
in general is the decentralization of government functions.11 Decentralization
has made the decision-making processes more political, and increased the
discretionary power of local public officials, both of which increase the risk of
corruption.
Prior to 1999, mining regulations were run by a centralized administration. Law
22/1999 and subsequently Law 32/2004 delegated much of this authority to the
regional governments, including that of the management of mining concessions.12
Two further reforms gave regional governments the capacity to raise revenue by
imposing new taxes and issuing new mining and export permits.13 In this period,
the number of permits increased from 750 permits in 2001 to more than 10,000 in
2010, of which 40% were for coal mining.
8
Kumparan. 2017. KPK Beberkan Kekacauan Pertambangan Batu Bara. 8th June 2017. Kumparan.
9
Institute for Energy Economics and Financial Analysis (IEEFA). 2015. Indonesia Illegal Coal-Trafficking Epidemic requires an Impartial Inquiry. June 2015.
http://ieefa.org/indonesias-coal-trafficking-epidemic-requires-an-impartial-inquiry
10
See section 3.1
11
Macdonald, K.F. 2017. The Risk Assessment of Corruption in the Awarding of Mining Permits. Transparency International Indonesia. Jakarta.
12
Law 23/2014 on Regional Government that shifts the authority to issue mining concessions from district government to provincial government is expected
to improve the granting process of mining concessions and its monitoring. However, the improvement of mining concession management from the law
enactment in 2016 has yet to be evident.
13
Devi et al; Gandataruna et al in Op.Cit. Macdonald, K.F. 2017
7
Decentralization has also enabled local politicians to exploit the sector as a “cash
cow” for their campaigns in local elections (Pilkada in Bahasa). Direct elections for
local and provincial leaders in Indonesia were held for the first time in 2007 and
the most recent polls at this level were in 2018.
Corruption and Indonesia’s politics
While this has increased democracy in Indonesia, elections are expensive for
candidates. State subsidies for parties are limited, so the money from small-scale
coal mining activities has become an important source of political funding for
candidates. An incumbent from a ruling political party can generate funds for a
political campaign by developing a coal-mining business or issuing coal-mining
licenses. Candidates or parties can illicitly collect campaign funds from companies
in exchange for future preferential treatment, including the awarding of mining
permits. KPK and civil society organizations have reported an abrupt increase in
the number of licenses issued during an election period or right after an election.14
Studies by Indonesia Corruption Watch ICW and the Indonesian Science Board
also found a connection between political corruption and the issuing of licenses.15
In the Kutai Kartanegara district of East Kalimantan, the former district head Rita
Widyasari issued 254 coal mining licenses and was dubbed by the local media
“queen of coal.”16 By June 2017, there were 625 mining permit holders in the district
compared to 1,404 mining permit holders in the entire province.17 Widyasari was
completing her second term in office and preparing her bid to become the next
East Kalimantan governor in 2018 when she was named as a corruption suspect by
the the Corruption Eradication Commission (KPK) and subsequently arrested and
convicted of corruption.
14
Nahar; Satu in Op.Cit. Macdonald, K.F. 2017
15
Ansori; Yuntho in Op.Cit. Macdonald, K.F. 2017
16
Jong, H.N. 2017. Queen of coal named corruption suspect in Indonesia. Mongabay. 5th October 2017.
https://news.mongabay.com/2017/10/queen-of-coal-named-corruption-suspect-in-indonesia/
17
Ghofar, M. 2017. Kutai Kartanegara miliki izin pertambangan terbanyak. Antara. 6th June 2017.
8
The increase in licenses issued during election times is mining sector, but it does not focus on coal nor
common practice in East Kalimantan, and Widyasari highlight a specific corruption case in coal mining.20
is not alone. Achmad Amins, two-time mayor of The 2017 Publish What You Pay (PWYP) report
Samarinda from 2000-2010, expanded coal mining by summarizes the trail of coal mining governance reform
issuing 63 licenses from 2007-2008 without proper initiated by KPK from 2014-2017 without adding new
Environmental Impact Assessments in the run-up to evidence on corruption in the mining sector.21 The lack
his failed campaign in the 2009 governor election.18 As of publicly available and comprehensive information
observed by JATAM (Mining Advocacy Network), local on corruption in mining coincides with the limited
elections have driven the exponential growth of coal number of corruption cases that have been legally
mining in East Kalimantan province.19 Its study of five pursued. So far, the KPK has investigated only three
districts (Kutai Barat, Kutai Timur, Bulungan, Berau, mining sector corruption cases involving government
and Paser Penajam Utara) showed the number of coal officials.22
mining licenses issued by local government increased
significantly ahead of local elections. This report aims to fill the gaps between widespread
awareness of corruption and actual recorded cases in
1.2 Report Objectives coal mining. It focuses on the importance of factors
such as gaps in the legal system, discretionary powers
Despite public awareness of the scale of corruption and the politicization of decision-making processes,
in the coal-mining sector, there are few reports that inadequate governance in the mining sector, and
provide systematic and in-depth analysis of the opacity in beneficial ownership.
Indonesian context. Existing reports on coal mining
mostly focus on the negative impact of coal, such as Political corruption in mining not only leads to the
Harrington (2017), Waterkeeper’ Aliance and Jatam misallocation of resources, it also affects the manner
(2017), Greenpeace (2014) and Jorde (2013) and its in which decisions are made. It implicates chumminess
sources of finance, among others Jorde (2013) and among corporations, bureaucrats and politicians in the
Scrivener and Lund-Harket (2013), Transparency wrongdoing. The case of PT Toba Sejahtra, highlighted
International Indonesia’s recent report helps shed light in this report, aims to provide deeper understanding of
on the corruption risks that hinder lawful, compliant the type of corrupt practices in the coal mining sector,
and ethical awarding of permits in the Indonesian the parties involved, and the implications.
18
Hardjanto, Y.S. and Rahmad, R. 2014. Fokus liputan: Bencana tambang di Samarinda. Mongabay. 31st August 2014.
19
Hidayat, F. 2013. Izin tambang di Kalimantan Timur terus bertambah. 28th May 2013.
20
Op.Cit. Macdonald, K.F. 2017
21
Abdullah, M (Ed). 2017. Administration of Coal Permit under Coordination and Supervision of KPK. Publish What You Pay Indonesia and KPK. Jakarta. .
22
Interview with Dian Patria, KPK, on October 16, 2017. See Kahfi, K. 2017. KPK names former regent suspect; estimated state losses Rp 2.7t. The Jakarta
Post. 3rd October 2017 , and Halim, H. 2015. Ex-PDI-P lawmaker gets ‘lenient’
sentence for bribery. The Jakarta Post. 24th November 2015 as background information on the case.
9
This report aims to give the public a better understanding of the complexity of
corruption in this sector, focusing on the systemic collusion between corporations
and government, and providing a solid base from which to develop strategic anti-
corruption initiatives in Indonesia and shift from coal business as a crony sector to
renewable energy.
1002. The Frame – Dissecting
Corruption in the
Mining Sector
“Do not let corruption be a part of Indonesian Culture”
(Mohammad Hatta, the founding father of Indonesia)
2.1 Corruption in state-society relations
Corruption is conventionally understood as “the abuse of public power for private
benefit”, referring to the private wealth-seeking behavior of someone who
represents the state and the public authority; or to the misuse of public goods by
public officials for private ends (World Bank in Amundsen 1999).23 Corruption
pits citizens against the state, which is represented by civil servants, politicians,
or anyone in a position of authority to allocate rights over (often scarce) public
resources in the name of the state.24 Corruption occurs when these individuals
“misus[e] the public power they are bestowed with for private benefit by accepting
money or some other form of reward, and then proceeds to misuse his official powers by
returning undue favors” (Amundsen 1999).
State representatives’ involvement in corrupt practices frequently takes the form
of political corruption, where the political decision makers systematically abuse,
sidestep, ignore, or even tailor laws and regulations to fit their interests. This often
takes place at the high levels of the political system.
Corruption in the mining sector
The mining sector is especially vulnerable to political corruption for a number
of reasons. The requirement for large capital expenditures; the high-level of
government regulation; its high-value commodities; large royalty and tax takes;
remoteness of operations; and dependency on local communities.25 Regulation,
licenses and approvals need to be sought from government officials for the
23
Amundsen, I. 1999. Political Corruption: An Introduction to the Issues. Chr. Michelsen Institute. Bergen.
24
Corruption also exists within and between private businesses, within non-governmental organizations, and between individuals in their personal dealings,
without any state agency or state official being involved. There is corruption also in the form of bribing, swindling within and between private businesses, as
well as individuals and employees in private firms. This kind of corruption may even have repercussions in the political system, as it can destroy the public
morale if there is no effective remedy. However, most definitions of corruption will exclude this intra-societal corruption, and emphasize corruption as a
state-society relationship. See Amundsen, I. 1999. Political Corruption: An Introduction to the Issues. Chr. Michelsen Institute Development Studies and Human
Rights. Bergen, Norway.
25
Ernst & Young. 2010. Fraud and corruption in mining and metals: Focus on business ethics. Ernst & Young. London.
11exploration, development, construction and operation interest, furthers the interests of groups that dominate the
of a mine. Typically, the government also owns the industry or sector it is charged with regulating”. Corrupt
infrastructure (ports and railway), which means that conduct may be intended to influence regulatory
companies and their agents are constantly dealing with design or enforcement. Corruption associated with
government bodies to get their products to market. regulatory violation is a form of corruption intended to
The government is also responsible for reviewing break or disregard existing legislation and regulations.
environmental and social impact assessments;
planning for local and regional development; upholding There are a number of factors which increase the risk
health and safety standards; and investing in and of corruption at every stage of the mining process.
distributing revenues from mineral development. As a
result, officials who have the power to block, delay or Weaknesses in the anti-corruption, legal and judicial
frustrate a project may attempt to solicit bribes for the systems may undermine governments’ capacity to
benign exercise of that power. effectively detect, prevent and sanction corruption.
Empirical evidence shows that high levels of
Using various case studies, the 2016 OECD report politicization of decision-making processes and of
“Corruption in the Extractive Value Chain: Typology of discretionary power held by both high and lower-
Risks, Mitigation Measures, and Incentives” showed ranking public officials are other risk factors. This
that corruption risks may arise at any point in the might be because of weak standards over conflicts
extractive value chain. The report noted large-scale of interest, inadequate regulation of lobbying and
corruption, involving high-level public officials, in the political campaign financing, and a lack of transparency
awarding of mining, oil and gas rights, procurement in the public finances. In particular, there may be
of goods and services, commodity trading, revenue inadequate safeguards against the risk of collusion and
management through natural resource funds, and political interference associated with the “revolving
public spending. This practice might take various door phenomenon”, whereby individuals switch
forms, although “trading in influence, political capture or between high-level positions in the public and private
interference, and regulatory capture” are the dominant sectors. Poor governance in the sector is another risk
tools applied to influence the decision-making process factor.
by circumventing or overlooking rules.
The governance of the mining sector often suffers from
Trading in influence is “the process or act by which a insufficient segregation of roles and responsibilities. In
person who has real or apparent influence on the decision many instances, state-owned companies were found
making of a public official exchanges this influence for an to be acting both as the administrator and regulator of
undue advantage”. the sector.
Political capture or interference refers to “private The increasing complexity of corruption patterns
interests significantly influencing decision-making makes it harder to tackle. Corruption can hide behind
processes of public officials to their own advantage, such as multi-layered structures across various jurisdictions
gaining favorable royalty rates in violation of national laws, involving shell companies and corporate vehicles used
or to get permit approvals, even in breach of national laws, to channel or disguise corrupt payments and distance
or to gain access to commercially sensitive information”. the corrupt agent from the crime. The lack of access to
adequate information on these corporate structures,
Similar to political capture, regulatory capture occurs including on beneficial ownership information, is one of
“when a regulatory agency, created to act in the public the biggest corruption risk factors.
12REVENUE
AWARDING OF EXTRACTION SPENDING
DECISION TO REVENUE REVENUE
MINING, OIL AND OPERATIONS AND AND SOCIAL
EXTRACT COLLECTION MANAGEMENT
GAS RIGHTS REGULATION INVESTMENT
PROJECTS
Figure 1.
Extractive industry/mining value chain. Corruption is possible in each of these stages.
Source: Resource Governance Institute in OECD (2016)
2.2 Assessing corruption risk in Indonesia
In Indonesia, these risks of corruption are real and have significant impacts.
Transparency International Indonesia’s latest report assesses a total of 35
corruption risks. It finds that 86% of these risks are very likely to happen and
/ or will have severe impacts.26 Most of the very high-level risks appear to be
associated with the way mining permits are awarded, and the determination
of mining areas. The largest risk of corruption came from vulnerabilities in the
awarding process (54%), followed by the risk related to practices within the
awarding process (20%). It suggests that the mining sector is more prone to
political corruption than bureaucratic corruption.
This political corruption risk is amplified by opacity on beneficial ownership in
Indonesia. When the true owners of business entities are unknown, the public is
left in the dark about who controls companies’ decision-making. The law currently
only requires mining companies to disclose legal owners as registered with the
Ministry of Law and Human Rights.
Who are the true owners?
While the market may appear to be competitive with multiple companies, in
fact there might be only a few people who control them. Hiding the beneficial
ownership allows business owners to act as a monopoly or cartel by owning and
controlling multiple companies under different legal names or business entities. It
also makes it harder to prevent conflicts of interest. This could mean, for example,
that an ostensibly open bidding process ends up favoring companies in which
public officials or their affiliates have a stake, by corruptly limiting who can bid.
26
Op.Cit. Macdonald, K.F. 2017
1302.
Another example is manipulation of “local content” Currently, there is no regulation that explicitly
policy, when a bidding process may require the requires companies in the extractive industries to
formation of consortia or joint ventures between a disclose who their beneficial owners are. Companies
foreign company and a local firm (or a businessperson) are only required to name the board of directors
or state-owned enterprise. The requirement to form a and shareholders (legal owners). Oil and gas mining
joint venture with a local partner can be used to favor regulations (Government Regulation No. 35/2004) also
companies owned by, or connected to, public officials only require disclosure of whether a company controls,
to serve politicians’ interests. or is controlled by, another company.
Although several regulators in Indonesia insist on the The nature of coal sector that requires close
disclosure of beneficial ownership, it is not required in connection between business and government along
all sectors.27 There are issues including the appropriate with Indonesia’s weak regulatory frameworks creates
definition of beneficial ownership and information political and systematic other than bureaucratic
collection and it has proved difficult to develop a corruption, in the forms of trading of influence,
database of beneficial ownership in Indonesia.28 Vital political capture and regulatory capture. It is also
registries, such as the law administration system, does difficult to identify conflict of interest involving key
not include the disclosure of beneficial ownership. decision makers in the opacity of beneficial ownership
regulation.
27
Regulations in financial markets and banking sectors have already required the disclosure of beneficial ownership within their policies. For example, Bank
Indonesia (BI) in BI Regulation No. 14/27/PBI/2012 regulated the requirements for banks to request beneficial ownership information of an account holder,
as well as the requirement to have customer due diligence (CDD) procedures. Indonesian Financial Services Authority (OJK) also applies the disclosure of
the BO information in its regulation in POJK 22/POJK.04/2014, regarding to know your customer (KYC) principles in the capital markets. See Pradiptyo,
R., Wibisana, P.S., and Hilman, M. 2017. Final Report: A Roadmap of Beneficiary Ownership Transparency in the Extractive Industries in Indonesia. Coordinating
Ministry of Economic Affairs, Jakarta, Indonesia.
28
Pradiptyo, R., Wibisana, P.S., and Hilman, M. 2017. Final Report: A Roadmap of Beneficiary Ownership Transparency in the Extractive Industries in Indonesia.
Coordinating Ministry of Economic Affairs. Jakarta. Indonesia.
1403. Corruption in Coal Mining –
The Game of Political Exposed
Persons
“[In Indonesia, the] extractive, energy, and infrastructure sectors are
big boys’ games. In order to succeed, you need to know the big boys,
keep a good rapport, and use their influence to make, curtail, or even
break the rules in your favor. You have to make them your family”
(La Ode Ida, Ombudsman of Republic of Indonesia)
3.1 The game
While the strong reaction to corruption, collusion and nepotism, coupled with a
severe economic crisis, were key triggers of the 1998 reform, the role of the “big
boys” – or the Politically Exposed Persons – continues to surface in corruption
cases in the extractive sector.
A Politically Exposed Person (PEP) is an individual who holds or has held a
prominent public role (such as head of state or government, senior politicians,
judicial or military officials, senior executives of state-owned enterprises or
important political party officials). PEPs can also include family members, as well
as personal, social and professional associates).29 Due to their position, many PEPs
are able to abuse or ignore rules, regulations, and policies. The weak oversight and
lack of transparency over beneficial ownership (see above) magnifies the risk of
corruption when natural resource concessions are awarded.
The “fraud triangle” outlines three factors that are in play when fraud occurs:
motivation, rationalization, and opportunity.
The opportunities for corruption in coal mining sector are huge. A country like
Indonesia with high addiction to coal – called “the dirty man of Asia” - creates
policies that ensure the continuity and profitability of the coal business. The
government initially planned to reduce coal production to 413 million tonnes in
2017, from 2016 production plan of 419 million tonnes,30 before falling to 400
29
United Nations. 2004. United Nations Convention against Corruption. United Nations. New York.
30
Anonymous. 2017. Dirty man of Asia deepens addiction to coal. Asia News Network. 30th December 2017
http://www.nationmultimedia.com/detail/opinion/30335079
15million in 2019. However, coal production in 2017 reached 477 million tonnes,
far outstripping 2016 actual production of 434 million tonnes.31 In this kind
of environment, a motivated PEP would have plenty of opportunity to exploit
loopholes in the policy process to commit acts of fraud and corruption.
The case of Aburizal Bakrie and Bumi Resources
Aburizal Bakrie –former Golkar Party chairman and current chief patron, former
coordinating minister for the economy and for people’s welfare – is one PEP active
in the coal mining sector. He grabbed the headlines in 2001 when his company,
Bumi Resources, with only three years of experience in the oil and mining sector,
acquired an 80% stake in PT Arutmin Indonesia, the fourth largest coal producer
in the country, from BHP Billiton Australia.32 In 2003, Bumi Resources bought PT
Kaltim Prima Coal (KPC) from Rio Tinto and BP. KPC was the largest coal producer
in Indonesia, holding 90,000 hectares of coal mining concession rights in Sangatta,
East Kutai district, with an average annual production of 15 million tons.33
As part of the Coal Contract of Work between the Indonesian Government and
KPC, the company was required to sell to Indonesian shareholders. However, the
power struggle between central and provincial governments over who had the
right to acquire the equity delayed the divestment process for years, leaving Rio
Tinto and BP in limbo.34 Bumi Resources was able to capitalize on Rio Tinto and
BP’s frustration with the process by acquiring Sangatta Holdings Ltd. (SHL) and
Kalimantan Coal Ltd. (KCL) as KPC shareholders, at a knock-down price of US$
500 million, some 40% lower than its true value.35 BP’s vice president in Indonesia,
Nico Kanter, argued that the greatly reduced price was because circumstances
had changed since the company was valued in 2001, particularly the price of coal.
Yet the deal cost Rio Tinto and BP a projected profit of US$ 1.2 billion, or US$
601.01 million each, over the next ten years. Rio Tinto defended the decision to
sell its shares by saying it was a transaction to transfer the ownership of Sangatta
Holdings Ltd, and Kalimantan Coal Ltd. as the parent companies, not that of KPC,
so that Bumi had to continue the divestment process with the government.
Despite a complaint from the provincial government, Bumi’s bid was allowed by
the Minister of Energy and Mineral Resources, and the national parliament.36 It
would seem that Rio Tinto and BP had acted as guarantors so Bumi could obtain
funds from international lenders to finance the acquisition. Bumi got a US$ 404
million loan from Singapore’s United Overseas Bank, US$ 318 million from Credit
Suisse First Boston, US$ 46 million from Australia’s Macquarie Bank Ltd., and US$
40 million from Leighton Financial.37
31
Ibid
32
Atmanto, I.A. 2003. Bumi sangata memilih Bumi. Majalah Gatra, No. 37/IX, 2nd August 2003
33
Prasetyawan, W. 2005. Government and Multinationals: Conflict over Economic Resources in East Kalimantan, 1998-2003. Southeast Asian Studies, Vol. 43,
No. 2, September 2005. Kyoto University, Kyoto.
34
Ibid
35
Ibid
36
Ibid
37
Ibid
16Shortly after the 1998 reform, the political Ridlatama Group. Churchill had worked with this
landscape changed significantly, with power Indonesian company in mining coal for export
dispersed from the centre to provincial and to India and China.39 In May 2008, it disclosed
regional governments. It appears that BP and Rio that it was sitting on a “significant” resource of
Tinto, by siding with Aburizal Bakrie, were hoping thermal coal — 2.73 billion tons, making the site the
to get political protection in two forms.38 First, seventh-largest undeveloped coal mining asset in
the sale of KPC would protect BP and Rio Tinto the world, with the potential to generate US$ 700
in the short term from on-going attacks from the million-1 billion annually for 20 years.
East Kalimantan governor and other local political
actors, who were using the issue of nationalism There was, however, one problem: Churchill’s
and localism against the companies. Second, licenses covered an area in East Kutai district
their interests in Indonesia as a whole would be once controlled by several companies affiliated
politically protected in the long term. with the Nusantara Group, a politically connected
Indonesian conglomerate that had allowed its
Aburizal was a rising star in national politics at that licenses to expire. A big Nusantara shareholder was
time, having built a solid career in business. He Prabowo Subianto, a former general and chair of
was appointed Coordinating Minister in President the Gerindra party, who was also a political backer
Yudhoyono’s government from 2004-2009, and and friend of Isran Noor, former East Kutai district
became Golkar party chair in 2009. As the ruling head and current East Kalimantan governor.40 Soon
party during the Soeharto administration, Golkar after Churchill disclosed its discovery, Isran Noor
was blamed for the economic and political mess revoked Churchill’s licenses and extended the
that led to the reform process of 1998. However, expired licenses held by Nusantara.
the party re-grouped and emerged as the second
largest party in the 1999 general election, just When Noor revoked the Churchill-Ridlatama
behind the new popular party, the Indonesian licenses in May 2010, he said the company had
Democratic Party of Struggle (PDI-P). Golkar carried out illegal logging in a forestry area. He
subsequently won the 2004 general election, later accused Churchill of forging its mining licenses
having benefitted from the network of offices it and holding licenses that overlapped with those
had established at the sub-district level during the previously issued to Nusantara. However, Churchill
Soeharto years. believed that the overlapping licenses were
engineered as part of a “high-value asset grab”.41
The Churchill vs Nusantara case The companies fought the case all the way up to
Indonesia’s Supreme Court. Against a backdrop of
The Churchill mining case illustrates the extent of claims and counterclaims regarding illegal logging
trading in influence and political capture in the coal and the authenticity of both parties’ documents,
mining industry. the Supreme Court finally ruled against Churchill
in April 2012. Churchill turned to international
The case began in 2008 after Churchill, a London- arbitration, a parallel justice system open only to
registered mining company, acquired a 75 percent foreign investors in Indonesia.
stake in four licenses awarded to the Indonesian
38
Ibid
39
Schonhardt, S. 2012. British mining firm sues Indonesia for asset seizure.
The New York Times. 6th June 2012.
40
Ibid
41
Ibid
17Churchill claimed US$ 2 billion in compensation for the Although Isran Noor told the media that his friendship
loss of its licenses, but eventually lost the case when with Prabowo Subianto was not the reason he had
the World Bank’s International Centre for Settlement revoked Churchill’s licenses, Churchill believes that
of Investment Disputes (ICSID) ruled that Churchill’s the case involved “a political power play at the regional
claim was based on forged documents.42 Churchill was level”. 44 Awang Faroek Ishak, former head of East
also ordered to reimburse Indonesia for 75 percent of Kutai district and former governor of East Kalimantan,
the US$12.3 million dollars in legal expenses and court described the situation as “a major corruption case in our
fees the country had incurred. country” during his testimony in court.45 According to
court transcripts, Ishak said that Isran Noor may have
The forged documents which cost Churchill the case been implicated in the scheme.
dated from 2007-2010, and covered the time when
Churchill bought 75 percent of Ridlatama Group. The Churchill case throws light on the importance
They included exploration licenses, survey licenses, of political connections in Indonesian business and
spatial analyses and legal and cooperation letters, all how these can be used corruptly. Churchill’s local
purportedly signed by officials from either the East partner, Ridiatama, exploited its connections with
Kutai district or East Kalimantan province. In the view local government officials in forging the documents
of the international tribunal, Churchill’s Indonesian for the coal mining licenses. But the Nusantara Group
partner Ridlatama had attempted to substantiate proved to have more powerful political connections, or
its claim to the mining concession using crudely stronger “chumminess”. As a result, Churchill’s license
forged documents and may have “benefited from the was revoked and the expired license held by Nusantara
assistance from an insider to introduce the fabricated was extended.
documents into [East Kutai district’s] databases and
archives”.43 According to the tribunal, this misconduct
by Churchill’s local partner, and the company’s lack of
valid licenses, undermined any right to compensation
for the loss of the East Kutai mine.
42
Esterman, I. 2016. Lessons from the 2 billion coal mining lawsuit against Indonesia. Mongabay. 20th December 2016 < https://news.mongabay.com/2016/12/
lessons-from-the-2-billion-coal-mining-lawsuit-against-indonesia/>
43
Op.Cit. Esterman, I. 2016
44
Op.Cit. Schonhardt, S. 2012
45
Ibid
18Box 1.
The business of politics in Indonesia
Strategic alliances between regional/local and national elites and PEPs
dominate Indonesian business and politics. Decentralization gave district
heads and governors the power to issue a range of business permits
– everything from land conversion to mining and plantation licenses.
Having local government allies in resource-rich regions is an invaluable
asset for political-business elites at the national level. On the other hand,
local PEPs need political protection to secure their on-going corrupt
practices in generating revenue from the natural resource sectors, as well
as political backing when they aspire to compete at the higher political
level.
The story of Governor Nur Alam shows the symbiotic nature of the
relationship. Nur Alam’s success in Southeast Sulawesi Province (Sultra)
is owed, in part, to his close ties with Hatta Rajasa - former Coordinating
Minister for Economic Affairs, PAN (The National Mandate Party)
Chairman, and Prabowo’s vice presidential candidate. Prior to his
political career, Nur Alam was a well known businessman in Sulawesi,
with a contracting business, PT. Tamalakindi Puri Perkasa. In 2008, Nur
Alam ran a well-funded campaign for the governorship as a candidate for
PAN, defeating both Golkar, the incumbent, and the favorite, Ali Mazi. At
the time, PAN was not a prominent party in Sultra. During his six years as
governor, PAN district heads won almost every district election, turning
Southeast Sulawesi into one of the only PAN strongholds in the country.
During Hatta’s tenure as Minister for Transport (2004-07), Nur Alam’s
companies won contracts for multiple infrastructure projects across the
country, contributing significantly to the expansion of his business.
Source: Warburton (2014)
1903.
3.2 The chummy coal sector and influx of PEPs
The chummy coal sector and its strong reliance to government regulations and
licences have linked it with politics and political person. As a result, the growth
and profitability of coal mining since 2000 has coincided with more PEPs entering
the business. There have been a number of cases where overseas companies
have sold their stake in mining operators to Indonesian businesses with political
connections.46 A few examples:
• New Hope Mining of Australia sold its stake in Adaro in 2005 to the Rachmat/
Soeryadjaya/Garibaldi families and gave up managerial control of Adaro to its
new local owners;
• Samtan of South Korea sold a portion of its majority share to the
Sudwikatmono family in 2004.
• Luhut Binsar Pandjaitan, the current Coordinating Minister of Maritime
Affairs under the Joko Widodo government, established the PT Toba Sejahtra
group in 2004 and acted as majority share holder (99.9%) in a business that
includes four coal mining companies under its subsidiary companies, namely
Toba Bara Sejahtra and Kutai Energi that hold various concessions in East
Kalimantan province.47
The exponential growth in Indonesian coal
Indonesia’s coal industry has transformed itself from being an unknown, minor
player in Asia’s coal markets to the world’s largest exporter of thermal coal in
less than three decades. The take-off period was from 1989 to 1999, when coal
production grew at an average annual rate of 30 percent reaching 81 Mt in 1999.
Production was focused on Kalimantan rather than Sumatra due to its favorable
location close to North Asia’s lucrative export markets (Japan, Korea, and Taiwan);
46
Lucarelli, B. 2010. The History and Future of Indonesia’s Coal Industry: Impact of Politics and Regulatory
Framework on Industry Structure and Performance. Working Paper 93, Program on Energy and Sustainable
Development, Stanford University, Serra Mall, Stanford.
47
Firmansyah. M.R. 2017. Alasan Luhut jual 90% saham Toba Sejahtra. Kumparan. 9th October 2017.
20better transportation and logistical network; and the higher quality of Kalimantan
coal compared to Sumatran coal.
The growth was driven by coal exports, which reached 55 Mt in 1999. In 2000-
2008 when domestic investors, with government support, gained majority
ownership of Indonesia’s largest coal producers, Indonesia’s coal industry
continued to expand by 12 percent a year over this period. In 2005 Indonesia
became the largest exporter of thermal coal, with 117 Mt exported.
In 2008, Indonesia’s exports had increased to 198 Mt, eclipsing Australian thermal
coal exports of 115 Mt. The boom continued over the following years, driven
by surging demand from China and India.48 Indonesia’s coal output grew by 68
percent over the period, from 291 Mt in 2009 to 490 Mt in 2013. Most of the
supply growth served the export market. Exports surged from 233 Mt to 424 Mt,
with China and India taking almost 90 percent of the increased output, while only
about 4 percent was destined for domestic consumption. In a relatively short time,
the Indonesian coal industry has become a major player in the seaborne thermal
coal market in Asia, accounting for half of Asian thermal coal imports.49
While it appears that this growth is because of the availability of low-cost mines
close to ports and Indonesia’s advantageous geographic location, research from
Attwood et al (2017) says that it has actually been driven by subsidies. Their report
identifies fifteen subsidies to Indonesia’s coal industry in the forms of direct and
indirect transfer of liabilities, government revenue foregone, provision of goods
and services below market value, and income or price support.50 They calculate
that just seven of those policies were worth IDR 12.4 trillion (US$ 946 million)
in 2014, while in 2015, subsidies to coal production were estimated to be worth
approximately IDR 8.5 trillion (US$ 644 million).
48
Cornot-Gandolphe, S. 2017. Indonesia’s Electricity Demand and the Coal Sector: Export or meet domestic demand?
Oxford Institute for Energy Studies, Oxford.
49
Ibid
50
Attwood, C et al. 2017. Financial Supports for Coal and Renewables in Indonesia; GSI Report. The International
Institute for Sustainable Development. Winnipeg, Manitoba.
21Box 2.
Some PEPs behind the coal
The Indonesian coal industry is fragmented with only a few big producers and many
small players that own coal mine concessions mainly in Sumatra and Kalimantan.
The six largest coal producers in Indonesia are Bumi Resources (Kaltim Prima Coal
and Arutmin Indonesia), Adaro Energy, Kideco Jaya Agung, ITM, Berau Coal and
Tambang Batubara Bukit Asam, or Bukit Asam. Together they accounted for slightly
more than 50 percent of Indonesian production in 2015. It is common practice
for coal mining businesses, both at the local and national level, to bring PEPs into
their corporation. A closer look at major coal mining businesses operating in East
Kalimantan reveal the involvement of PEPs from various background, such as:
• Sandiaga Salahudin Uno (Adaro Energy, shareholder), - Jakarta deputy
governor (2017-2018), vice presidential candidate in the 2019 presidential
election, former Gerindra Party’s deputy chief patron
• Raden Pardede (Adaro Energy, Independent Commissioner) - Deputy
Coordinator of the Assistance Team to the Minister of Finance, Republic of
Indonesia (2000-2004); Chief of Financing for Indonesian Infrastructure
Development (2004-2005); Special Staff of Coordinating Minister for the
Economy (2004-2005); Vice President Director of State-owned Asset
Management Company (2004-2008)
• Theodore Permadi Rahmat (Adaro Energy, Vice President Commissioner) –
National Economic Board (1999-2000)
• Lieutenant Colonel Army (Ret) Palgunadi Tatit Setyawan (Adaro Energy,
Independent Commissioner) - President Commissioner for PT Jakarta
Propertindo (2010-2013)
• DR. H. Darmono, S.H., M.M (Berau Coal, Commissioner) - Deputy Attorney
General of the Republic of Indonesia (2009-2013); Acting Attorney General of
the Republic of Indonesia (2010)
• Admiral (Ret) DR. Marsetio (Berau Coal, Independent Commissioner) - Head
of Indonesian Navy (2012-2014)
Source: Directorate General of Legal Administration, Ministry of Law and Human
Rights (2018); Cornot-Gandolphe (2018)
2204. Toba Sejahtra – A General in
the midst of East Kalimantan’s
Political Corruption
“Political corruption that plagues the coal mining business is
ecologically destructive. The corrupt are only seeking (resources) for
rent and power, while ignoring the ecological impact. Corruption
must be understood beyond bribery. Public policy that politically
motivates and causes environmental destruction, as well as creating
financial loss to the government, is also corruption”
(W. Riawan Tjandra, Atma Jaya University Yogyakarta)
4.1 East Kalimantan political corruption map: new landscape, old structure
Political corruption is a long-lasting practice in East Kalimantan. National and local
politicians merge business and politics for their own interests, benefited from the
province’s rich natural resources.
On September 26, 2017, the anti-corruption agency KPK named Rita Widyasari,
the regent of Kutai Kartanegara district in East Kalimantan, as a suspect for
allegedly receiving unlawful gifts in her position as regent.51 She was accused of
accepting an IDR 6 billion (US$ 442,000) bribe from Hari Susanto Gun, CEO of oil
palm grower PT Sawit Golden Prima, in 2010 in exchange for an oil palm plantation
permit.52 KPK also detained Widyasari’s colleague, Khairudin, who is the head of
the Kutai Kartanegara chapter of the National Committee of Indonesian Youth
(KNPI). The agency plans to examine Widyasari’s personal assets, which grew
almost tenfold from 2011, the year after she became district chief, to 2015, when
she ran for re-election and declared total assets of IDR 236.7 billion. On July
6, 2018, the Jakarta Corruption Court sentenced Rita to 10 years in prison for
accepting bribery from various projects.53
51
Andri, N. 2017. Kutai Kartanegara regent named bribery suspect. The Jakarta Post. 26th September 2017
52
Jong, H. N. 2017. ‘Queen of Coal’ named corruption suspect in Indonesia. Mongabay. 5th October 2017.
53
New Desk, 2018. Kutai Kartanegara regent sentenced to 10 years for graft, The Jakarta Post, 7th July 2018.
23Widyasari is not the first local PEP in East Kalimantan
implicated in a corruption case. Syaukani Hasan Rais,
her father and former two-time district head of Kutai
Kartanegara, was found guilty on four corruption
charges that cost the state IDR 120 billion. Syaukani
was found guilty in early 2008 and sentenced to six
years imprisonment. This verdict was upheld on appeal
and sentence was imposed despite his attempt to
return the embezzled money.54
During the decentralization in Indonesia, corruption
cases in East Kalimantan came to public attention,
particularly cases of corruption involving members
of parliament as well as regional heads and deputy
regional heads.55 The pervasiveness of corruption in
East Kalimantan has been linked to the management
and exploitation of the province’s natural resources,
including coal. Most of the cases have involved the
higher levels in the bureaucracy and parliament. The
main motivation behind financial misappropriation
seems to have been financing campaigns, (as
highlighted above), with the elites under pressure
to financially repay the political debt owed to their
supporters.56 The financial misappropriation often
involves the embezzlement of funds allocated to public
projects, with officials soliciting bribes from business
people. In practice, corruption, collusion and nepotism
occur at all stages of a project: tendering, recruitment, How regional politicians merge business and politics
promotion, budgeting and lawmaking.57
The role of the military and Golkar persists as both
Corruption is ingrained in the social fabric of East the old and new elites compete to capitalize on the
Kalimantan. KPK ranked East Kalimantan in ninth out new post-Soeharto institutions for their own benefit.
of ten provinces with most corruption cases in 2015, The former East Kalimantan governor Suwarna
one position above South Sumatra province.58 It is Abdul Fatah, for example, spent his career mainly
deeprooted, and dates back to the Soeharto years, within the military, until he entered political life
when institutions which facilitate the corruption were as the deputy governor in 1994.60 In 1998, he was
created. These institutional arrangements were deeply appointed governor with political support mainly from
associated with the military and the ruling political the military, and later on from Golkar and PDI-P (The
party at that time, Golkar.59 Indonesian Democratic Party of Struggle).
54
Evaquarta, R. 2008. Business and Political Actor Relationship in Indonesia’s Local Autonomy Project: A Comparative Study on Batam City and Kutai
Kartanegara Regency. Paper to the 17th Biennial Conference of the Asian Studies Association of Australia in Melbourne 1-3 July 2008. Department of Government
& International Relations. The University of Sydney. Sydney.
55
Diah, A.M. 2017. The Politics of Patronage in Intergovernmental Financial Transfer: The Role of Local Elites in East Kalimantan Province, Indonesia. Dissertation.
College of Arts and Education, Victoria University Melbourne, Australia
56
Mynt in Op. Cit. Diah, A.M. 2017
57
Farouk and Oetomo in Op. Cit. Diah, A.M. 2017
58
Indopress. 2016. Jawa Barat Provinsi Terkorup. Indopress. 23rd November 2016
59
Robison in Aspinall, E. and van Klinken, G. 2011. The state and illegality in Indonesia. In The state and illegality in Indonesia (eds E. Aspinall and G. van
Klinken), Ch 1, pp. 1-28. KITLV Press, Leiden.
60
Op. Cit. Prasetyawan, W. 2005
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